Clubs in crisis

The Football Management blog is required reading for those with an interest in football finance. Written by Coventry University's Dr John Beech - Portsmouth fan and former Football Supporters’ Federation Writer of the Year – the blog casts an often critical eye over the manner in which our clubs are run.

(Baffled by the language of debt? Read on for our brief dictionary on debt.)

Dr Beech’s latest post rounds up 2011’s “insolvency events” with the overwhelming majority taking place at non-league level. Sadly it is a pattern that looks set to continue with Darlington going into administration only days into 2012. It's the third time in 10 years that the Quakers have suffered this fate – read more on this at twohundredpercent.

2011 saw 13 insolvency events - three more than 2010 - although the number of “hard” insolvency events dropped from six to five. Dr Beech defines an event as hard once the courts or Companies House becomes involved.

Football Management’s Year in Insolvency Events:

CLUB

DATE

INFO

Leyton

Jan-11

Expelled from Isthmian League. Tier 8

Windsor & Eton*

Feb-11

Compulsory Liquidation. Tier 7

Plymouth Argyle*

Feb-11

Administration. Tier 3

Eastwood Town

Jun-11

Sold for £1. Tier 6

Rossendale United

Jun-11

Expelled from North West Counties. Tier 9

Gedling Town

Jun-11

Withdrew from E.Midlands Counties. Tier 10

Rushden & Diamonds*

Jul-11

Administration. Tier 5

Hucknall Town

Jul-11

Reverted to amateur status. Tier 7

Leyton*

Jul-11

Dissolved. Tier 10

Dawlish Town

Jul-11

Withdrew from Western League. Tier 9

Prescot Cables

Oct-11

Returned to amateur status. Tier 8

Rothwell Town*

Oct-11

Administration. Tier 8

*Hard insolvency event involving the courts or Companies House

Dr Beech acknowledges that the greater incidence of insolvency at non-league level might be the result of there simply being more teams the further you descend the pyramid. For example, Step One (the Premier League) is home to 20 clubs whereas Step 10 encompasses 17 leagues and 318 clubs.

However, he argues that there should actually be fewer insolvency events, proportionally speaking, as you move down the leagues. Budgets are smaller and the financial disparities between successive tiers is narrower than from the Premier League to Championship. Relegation need not be a financial disaster as the drop in TV income or gate revenue should be more manageable.

But Dr Beech says too many clubs suffer at the hands of (sometimes well-meaning) benefactors who “financially dope” their outfit with unsustainable levels of investment and fantastical business models. Should the owner become bored and withdraw funding, the club goes under. It’s an all-too-familiar scenario.

“I fear another depressing year for fans at too many clubs. Here’s hoping that the various versions of financial fair play protocols can begin to bite and force clubs into sustainable business models. Let’s also hope that all the words recently expended on football governance by politicians lead finally to an effective licensing system which includes an effective fit and proper persons test,” says Dr Beech.

The range of clubs involved in insolvency events is huge and makes sweeping statements a tricky business. From Plymouth Argyle, playing in the Championship as recently as 2010, to clubs who might be happy with a hundred paying punters, you’re often left comparing apples with oranges but one thing is certain.

Supporters of every club, no matter what size, feel as deeply and as passionately for their club as any set of Premier League or Championship fans do. The death of a club might only ever be covered by the local media, and escape national attention altogether, but that doesn’t make it any less of a tragedy for that club’s supporters.

Let’s hope 2012 sees fewer clubs in crisis than 2011.

Terminology: The language of debt

We are all too familiar these days with the vocabulary of football finance, forever hearing that so-and-so have called in the administrators, or that thingumybob have agreed a CVA. But what does it all mean?

“Broadly I would define an insolvency event as one which reflects a discontinuity in the operation of the ‘club as company’ caused by insufficient funding,” says Dr Beech. That can quickly lead to:

Administration. Your club is rescued, temporarily at least. Accountants take over the running of the club, doing everything but training and picking the players, and attempt to rebalance the books. Any saleable assets are almost certain to be sold and non-playing staff should start looking over their shoulders, wage bills are going to be slashed. (Example: Lots in the past two decades but Portsmouth are probably the best known.)

Company Voluntary Arrangement (CVA). Allows a company with major debt problems to agree a payment plan with creditors over a specified time. This is arranged post-administration in agreement with the courts and if clubs do not set one up they can expect a further points penalty on top of the standard 10 point deduction. (Example: Leeds United’s 25 point deduction in 2007.)

Liquidation/Winding Up. Bye bye football club, you are no more. If this happens to your club the only option is to start supporting your nearest rivals or, more likely, form a new club under a slightly different name. (Example: Halifax Town AFC, who were wound up and a separate club, FC Halifax Town, created.)